US midterm elections: 3 scenarios for markets
At a Glance
The desk's perspective centers on an anticipated Democratic control of Congress following the upcoming US midterm elections, which could significantly influence market dynamics. Per the full note from ING, with current polling showing an eight-point lead for Democrats and President Trump's declining approval ratings, a Republican resurgence seems less likely, although surprises are possible. This outlook aligns with our internal consensus forecasts that indicate moderate appreciation for the USD against major pairs in the upcoming months. Traders should keep an eye on the potential implications of these political shifts on market sentiment and the economic landscape.
Key Takeaways
- 01Expect a Democratic win in the US midterms to bolster USD strength.
- 02Current polling shows Democrats leading by eight points, indicating a likely shift in Congress.
- 03Consensus forecasts have USD targets ranging from 1.1400 to 1.2000 against key pairs.
- 04Monitor sentiment shifts post-election as significant fiscal policy changes loom.
Full Analysis
What the desk is arguing
The desk anticipates that a Democratic victory in the midterms will likely strengthen the USD due to expected policy constraints on President Trump. Per the full note from ING, the ongoing cost-of-living crisis and discontent over foreign policy, particularly regarding Iran, have bolstered Democratic support.
Given the current polling data — indicating a significant lead for Democrats — market sentiment may shift favorably towards the USD across major currency pairs like EURUSD and GBPUSD as traders recalibrate expectations surrounding economic and fiscal policies after the elections.
Where it sits in our coverage
The current spot for EUR/USD is 1.1253, with our consensus target suggesting a median range of 1.1600 to 1.1800 by December 2026. Key updated targets from select firms include: - Rabobank: Dec26 1.1800 - SocGen: Dec26 1.1400 - RBC: Dec26 1.2000
This view is somewhat above the central forecast of 1.1700, reflecting an optimistic outlook that aligns more closely with Rabobank and RBC, which anticipate higher USD relative strength.
How other firms see it
Some firms like Nomura and HSBC share a similar bullish stance on the USD, forecasting upward movements, with targets around 1.1700 and 1.1700 respectively. Conversely, firms predicting a weaker outlook such as Commerzbank, with a target of 149.0000 for the JPY, suggest varied sentiment that could influence market reactions differently.
As market dynamics unfold, cross-examine the implied direction in currency pairs, particularly watch for EUR/USD and GBP/USD relative movements that may signal shifts in sentiment tied to midterm outcomes and broader economic indicators.
Market Implications
Watch for potential USD appreciation against the EUR and GBP following the election results, specifically monitoring levels around 1.1260 for signs of bullish momentum. Any unforeseen shifts in polling prior to elections could create volatility and repositioning in the FX market.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Rabobank | Bearish | 1.1000 |
ING | Bullish | 1.1300 |
MUFG | Neutral | 1.1200 |
From the original
Articles US midterm elections: 3 scenarios for markets Published 10:02 United States Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Intensifying cost-of-living concerns, linked to the price of motor fuel and the war with Iran, have boosted the Democr
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